Money and Metals

Bloomberg reports on precious metals trading. "Gold in New York tumbled the most in three months as plunging energy costs reduced the appeal of the precious metal as a hedge against inflation. Gold is down 21 percent from a 26-year high of $732 an ounce on May 12, partly because the price of oil has dropped 24 percent from a record in July. Crude oil fell below $60 a barrel to a seven-month low."

"'Everybody is getting out of their positions,' said Nick Ruggiero, a trader at Eagle Futures. 'Crude came off almost $3 this week, and gold is following.' Losses accelerated after gold fell below $600. 'That was a big number,' Ruggiero said. 'We had a lot of sell stops for long positions.'"

"Hedge-fund managers and other large speculators decreased their net-long position in Comex gold futures in the week ended Sept. 26, Commodity Futures Trading Commission data showed on Sept.29. Speculative long positions, or bets prices will rise, outnumbered short positions by 71,244 contracts. Net-long positions fell by 6,624 contracts, or 8.5 percent, from a week earlier to the lowest since August 2005, the data showed."

"'All the funds are hitting the door at the same time,' said Frank McGhee, head metals trader at Integrated Brokerage Services."

"Silver for December delivery fell 59.5 cents, or 5.1 percent, to $11.045 an ounce. Palladium for December dropped $12.15 or 3.9 percent, to $302 an ounce. Platinum for January declined $35.20, or 3 percent, to $1,124 an ounce."

"'Contributing factors to today's decline were identified as sharply lower oil prices, a significant slowdown in the making in the U.S. economy, and the stampede for the exit doors by a notable number of hedge funds,' said Jon Nadler, an investment products analyst at bullion dealers Kitco.com."

"Gold for December delivery closed down $21.80 at $581.50 an ounce on the New York Mercantile Exchange. Prices closed lower Friday and Monday as well, so they've lost a total of $29.40, or 4.8%, during their three-session losing streak."

"'There remains a distinct smell of fear in the air over the [gold] bullion pits at the moment,' said Nadler. 'Despite robust recent jewelry off-take and a seasonality strength factor, the dominant theme for the moment is the petro-dollar one.'"

"For prices, 'it seems resistance around $608-$612 will keep the yellow metal capped, while further pressure in the oil market could see gold dip back into the previous $573-$594 trading area,' James Moore, an analyst at TheBullionDesk.com said."

"Overall, 'the near-term outlook for the precious-metals complex is bleak,' said Dale Doelling, chief market technician at Trends In Commodities. 'We'll just have to wait and see if those June lows hold to determine if the bull market turns into a bear market,' he said. The December gold contract fell to a low of $576 in June."

"Not even a threat of nuclear tests by North Korea could help boost demand for the metal as a safe haven in times of geopolitical uncertainty."

"'The message is that previously gold made a high, it's in a correction and there is really not a conceptual story or a risk appetite reason to invest, other than for a short-term trade,' says Woody Dorsey, behavioral market strategist at Market Semiotics, who expects continued weakness going forward."

"'We had a lot of physical demand when the spot price dipped below $600 around the middle of the month,' says Bernard Hunter, director of precious metals at Toronto-based ScotiaMocatta. Now that demand has been met and that gold has proved unable to stay above $600 an ounce, jewelry fabricators may wait until there is further price weakness before returning to the market, he says."

"'Physical buyers, such as jewelers, are very savvy when it comes to playing the market their way,' adds Hunter."

"The Canadian dollar finished lower versus the U.S. dollar on Tuesday as an empty domestic economic calendar left the commodity-linked currency little choice but to focus on another drop in oil and gold prices."

"'As the U.S. economy looks to deteriorate a little bit perhaps the Canadian economy will go along with that, and so the Canadian dollar has not held quite as well today,' said Carolyn Kwan, markets economist at Scotia Capital."

"'Commodity currencies are getting hammered because gold and oil are down,' said Robert Houck, a dealer with Wells Fargo. 'Whether it's a trend or not, these are big moves today.'"

"By midafternoon, the U.S. dollar was up 0.55 percent from late on Monday at C$1.1215, while the Australian dollar down 0.6 percent at $0.7430. The U.S. dollar jumped 1.7 percent to three-year highs around 7.8870 South African rand. The Norwegian crown fell for a third straight session, trading at 6.5849 to the dollar, not far off its weakest point in six months."

"'Markets are range trading and looking ahead to the ECB and Bank of England on Thursday as well as a deluge of Fed speakers,' said Dustin Reid, senior currency strategist with ABN AMRO. 'There's nothing fundamental driving markets right now.'"

"Against the yen, the dollar rose 0.2 percent to 117.90 yen. The dollar climbed 0.2 percent to 1.2452 Swiss francs."